Subscription models as a chance to shape the future of the automotive industry

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Customer demand and target groups for car subscription models are growing, and subscription-based products are increasingly perceived as an alternative to leasing or financing. Over the years, increasing investments in eCommerce, online platforms and new sales models have enabled subscription models to steadily increase market shares. Therefore, subscription models represent an attractive complementation of product portfolios for existing providers or can be leveraged for entirely new businesses entering the market.

Over the past years, Capgemini Invent has closely observed the market for car subscriptions and has frequently analyzed recent trends – both on supply and demand side.

In the following study we will outline these developments and discuss key fields of action to potentially make the subscription model more attractive for customers and establish a successful business setup. Finally, this article provides an outlook for the future of subscription models.

Customer demand for subscription models

Based on a customer survey conducted in Germany with 600 respondents the drivers and motivation for closing a subscription contract are becoming more transparent. As a third of the customers consider subscription models a valid alternative to financing and leasing it is important to meet their expectations when developing dedicated products.

The flexibility and convenience provided by such models are two of the key decisive factors as the shorter contract terms and the possibility to change vehicles do not bind the customers as much as the classical products with average contract periods of 3 years. This fact also supports the introduction of new technologies, e.g. electric vehicles, as customers can gather experiences without making any long term decisions.

Next to pricing transparency which is highly appreciated by the customers to perfectly manage their financials the aspect of trust is most important. As customers still show the need for personal assistance and advisory they will more likely turn to their known dealers and OEMs when it comes to signing a contract.

As much as we identified drivers we also received feedback for hindering reasons. Here the comparably higher prices for subscriptions need to be taken into account but most important the lack of information on these new models which calls for more and better marketing in the future.

Market dynamics for subscription models

Having observed the subscription market over the past years we have identified three main developments lately that show that the players are still in a finding phase and that it is not fully clear how best to address the market and how the product needs to look like for a successful business:

  • The market is clearly consolidating with providers leaving or shifting to other models
  • Pilots have provided valuable insights on customer expectations thus leading to renewed offerings
  • Many start-ups have emerged from the surface to be part of the hype creating a more intense competition for market share

Provider trends

With the growing competition among subscription providers it becomes more and more important to take customer demands into account and become more customer centric. The global pandemic has not changed customers’ purchasing criteria for subscription offerings much but has shifted their prioritization. For many the financial uncertainty and the wish for flexibility increased and providers have reacted by adapting their offerings regarding:

  • Stronger focus on sustainability
  • Increased variety of offerings
  • Targeting of new customer segments
  • Focus on price sensibility of customer

To stay ahead it will be essential to react to changes in customer preferences is essential and quickly adapt to the new needs and reflect this in their product dimensions.

Future key action areas

To enhance the attraction of subscription models even further we have identified three main action areas that providers need to focus on:

  • Make subscription models more comprehensible to the broad audience
  • Ensure they are more present in the context of the overall portfolio
  • Design them to be more cost effective and thus more interesting for potential customers

This will require the full integration into the portfolio and a focus on a holistic lifecycle management. Designing the asset management strategy, managing residual values and making use of the various sales channels is essential.

Subscription Models POV

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Unsere Experten

Dr. Michael Zellner

Experte in Digitalisierung und Innovation